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Wednesday, January 11, 2012

January -who is the biggest

I wish all the readers of this monthly note a fulfilled 2012.

Well, can 2012 be a less turbulent year? One of the things I noted in reading the, much diminished, press in December was that Brazil has now overtaken the Brits as the 6th biggest economy in the world, this according to The Centre for Economics and Business Research Ltd, a London based research house. The whole pecking order however makes for really interesting reading and shows how change tends to ‘sneak up’ on us. For example Russia has pushed India down to 10th place:

As the rankings and scale of these mega economies shifts, so too their influence on the broader investment markets. To test thinking, would one naturally regard Brazil as an investment destination? Can we name one listed company in Brazil? Yet, one automatically assumes that an offshore investment should include UK assets. It is for this reason that one gives asset managers the broadest possible mandate within the confines of each investor’s, lifestyle driven, volatility/return profile.

The year ended in a strange, mixed way. Despite Euro turmoil, the JSE ‘only’ ended 0,6% down and the Rand actually strengthened slightly. What remains worrying is that the Euro crisis is now left firmly in the hands of politicians to resolve. One can therefore expect that ordinary economics will be set aside for a while. Inevitably, a political solution involves deferring bad economic consequences for a future generation of Europeans (the cynic will say future voters; not current ones) to pick up. The wonderful thing about openly traded markets is that they continuously adjust. Bright and not-so-bright minds apply themselves at determining which sectors and companies will thrive and prosper in this environment and which won’t. Our task is to make sure the asset allocation (including onshore/offshore balance) correctly reflects lifestyle expectations and then allow these asset class managers the room to invest for best results.